Council tax hike warning for householders as town hall income dives

Householders face above inflation rises in council tax because of the economic slowdown.

Three out of four councils say the money they collect to pay for front-line services has dwindled.

And as income from fees and charges, such as those for using gyms, swimming pools and car parks dries up, most have had to revise their budget forecast.

Struggling householders face another hike in council tax as the money councils collect for services like swimming pools, car parks and gyms dries up

As a result, there is less to spend on services such as care for the elderly or school books.

Almost three-quarters have had to revise their budget position, with 83 per cent reporting a drop in income from fees and charges, the Local Government Association found.

One in four has seen a decline in the amount taken in council tax and rent - and two-thirds of councils report a drop in income from the sale of assets.

Two-thirds of councils reported a drop in the cash received from the sale of assets such as land and buildings, while a similar proportion said the interest they received on deposits had dropped.

Some 26 per cent of councils said the pressure on family finances had resulted in higher demand for services such as free school meals.

Up to 30 are refusing to pass on the 2.5 per cent cut in VAT, saying it is too expensive to adjust charges for services such as car parking. Wirral Council, in Merseyside, said it would make £110,000 this way.

Margaret Eaton, chairman of the Local Government Association - the umbrella group for councils - said: 'These figures demonstrate the effects the credit crunch and the recession are having on councils across the country and the potential impact on front line services.

'From seeing an increased demand for services such as free school meals, to seeing a drop in the money they can collect and therefore spend, councils are facing tough times but are determined to deliver for local people.

'Global problems have tipped the British economy into a recession that is affecting countries around the world.

'Councils will be pulling out all the stops over the coming months and years to protect local people and businesses from the worst effects of the slump.'

Earlier this month a separate study revealed that two in three councils are planning council tax rises to cover sudden rises in population.

A majority of local authorities - 64 per cent - said they would increase the size of bills landing on doormats in a bid to pay for the extra demand on public services, including schools, hospitals and transport.

More than 80 per cent of local authorities blamed changes in their population, including the massive rise in immigration when the former Soviet Bloc joined the European Union, for planned council tax hikes.

However, the Government has warned Town Halls that council tax increases could be capped if they exceed 4.2 per cent.

A Department for Communities and Local Government spokesman said: 'These tough economic times will affect different parts of the country in different ways, which is why the LGA are right that councils are well placed to help keep people in their homes and their jobs, and to support local communities.

'The first-ever three-year financial settlement has given local authorities an additional £8.9billion funding, and the security and flexibility they need to plan ahead and manage their budgets over the longer-term, so councils can continue to provide good quality local services during this global economic downturn.

'And with everyone feeling the pinch, council taxpayers are rightly looking to their councils for good quality public services and value for money.

'Over the next two years, we are looking to councils to make over £1.5billion efficiency savings each year that can be used to reinvest in local services or cut council tax bills.'